'Bond notes are here to stay'

Published: 12 July 2018

RESERVE Bank of Zimbabwe governor John Mangudya says the country's surrogate currency, the bond note, will be around for the foreseeable future.

Zimbabwe introduced bond notes in 2016 to ease an acute cash crisis in the country. The bond, which operates together with the multi-currency system that was introduced in 2009 has, however, failed to hold its own as it is fast depreciating against the United States dollar.

Mangudya told The Financial Gazette last week that the bond notes were providing a valuable export incentive to cushion local producers against international competition. "Zimbabwe is under a multi-currency system and we will be very clear that as long as the multi-currency system subsists, it means that the bond notes also subsist. The note is an export incentive and if we don't provide this to exporters it means that our exports will go down," he insisted.

"Therefore, as long as we are using a multi-currency system we also need an export incentive. Otherwise our companies will become very uncompetitive. If they are uncompetitive it means that we will have no foreign currency. If we abandon the multi-currency system, it means we also abandon the bond notes."

Mangudya said it was impossible for Zimbabwean industries to compete against countries using their own currencies, hence the need for the bond notes.

"This one is at the centre of my heart. We need exports in this country and for you to have foreign currency you need to produce. When we say Zimbabwe is open for business, we are saying we need to expand our production so that we can produce for the domestic market and also for the export market. But if we go to the export market there is competition.

"Now if we go there with a product that is in US dollars you won't be able to compete because others are using their domestic currencies so you also need to be given a subsidy that is called an export incentive so that you can compete in Zambia, in Mozambique," Mangudya said. - fingaz